Breeding Rights Sold on Alydar Are Taxable, Ky. Court Decides

The lifetime breeding rights to the champion stallion Alydar sold by Calumet Farm are taxable, the Court of Appeals ruled today.

Calumet sold an undisclosed number of those rights from October, 1982, through February, 1985. The sales allowed the owner a right to breed one mare each year and one additional mare every other year during the lifetime of the stallion.

State law exempts from taxation “horses or interests of shares in horses, provided the purchase or use is made for breeding purposes only.”

But in a unanimous opinion written by Judge R. W. Dyche III, the court ruled that does not apply to the situation with Alydar.

Even though it may be for the life of the horse, the rights sold for Alydar are still breeding fees, which are taxable.

In fact, the court said, the agreement specifies that the purchaser does not “become the owner of a fractional interest in the stallion.”

Judge B. William Howerton, in a concurring opinion, said the plan created by Calumet does not avoid the tax.

“I am convinced that the General Assembly intended to tax breeding fees, and I am unconvinced that it intended to exempt Calumet’s novel plan to sell ‘lifetime breeding rights’ in Alydar,” Howerton said.

Alydar, renowned for his Triple Crown duels with Affirmed in 1978, has been a successful stallion, siring such offspring as 1987 Kentucky Derby winner Alysheba.